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Business Intelligence Toolsets for FX brokers: Moving From Nice to Have to Must-Have

The pandemic has clearly shown just how complex risk management has become in the FX market, revealing the importance of implementing modern risk management strategies. The risks may well still be the same, but the pandemic-driven events of the past year have amplified these risks as volatility and trading volumes have both increased.

The uptake of Business Intelligence software amongst FX brokers has traditionally been quite low – from what I’ve seen, they are probably only used by around 20% of brokers worldwide. So why is the figure so low when the insight available from Business Intelligence tools can make such a significant difference to a broker’s bottom line?

Risk Managers predominantly rely on spreadsheets to analyse their trade activity and model their risk. The spreadsheets they have developed in-house are fairly sophisticated and provide them with useful, relevant information. Encouraging Risk Managers to move away from this tried and tested method and, in particular, to pay for tools to help them to further analyse their data has been difficult. In my view, this is mostly because they haven’t seen dedicated Business Intelligence tools in practice and, in particular, haven’t experienced the benefits of viewing a wide range of live data and up-to-date key metrics.

Time for a Change

The impact of the Coronavirus on financial institutions is also causing a shift in attitudes relating to a variety of technology applications as remote working becomes the ‘new norm’. As a result, Business Intelligence tools are becoming a higher priority than ever before – and we are certainly seeing this at Gold-i with a noticeable increase in the number of enquiries about our Visual Edge product. Given that team members are no longer all ‘housed’ within the same office, sharing up-to-date top-line data and having easy to access insightful dashboards is becoming increasingly important for brokers and managers worldwide.

I imagine it is very challenging to run a brokerage remotely without a centralised resource to provide an instant overview so that, at any time, you have a full understanding of your exposure as well as where you are making and losing money. You need access to this information on a timely basis in order to make key decisions to drive the organisation forward.

There are so many different attributes to trading and so many different but interconnected dimensions to Risk Management tools. Having never used sich dedicated tools previously, brokers don’t know what they are missing. Spreadsheets, no matter how complex they are, don’t provide timely information – they take time to manually update. In addition, the information they can provide is limited compared to data available with Business Intelligence and risk tools.

VE Client Analysis

Brokers should look at what other information they may be able to access and how this could impact their trading operations.  For example, spreadsheets don’t understand about scalping and can’t help to identify where toxic trades are coming from or whether brokers are sending toxic flow to their LPs. With a risk management technology platform developed specifically for FX brokers, users can drill down into data to get a thorough understanding of how they are making their money and where they could be making more money.

VE Position Size

Such tools also look at profitability by geographical region, asset class, size of trades, hold times etc. If the brokerage made $100k, it is important to know exactly where this profit came from and equally important to work out how the brokerage could potentially increase this profit to $200k. After all, the ultimate purpose of these Business Intelligence tools is to help brokers to make informed decisions about how to manage their risk more effectively and how to make more money.

One trend we have seen is that when a Risk Manager leaves a brokerage that has used Visual Edge, they quickly introduce us to their new organisation because they have experienced the benefits first hand and believe they cannot effectively gain a full picture about their P&L unless they have access to a consolidated overview and up-to-date drill-down data. To maximise profitability with any trading environment, you need to be able to fully understand the numbers on a timely basis, down to each individual client and each individual trade.

Business Benefits

When margins have been squeezed so much by ESMA and other regulatory pressures, what are the benefits of paying for a Business Intelligence platform when spreadsheets seem to suffice for most of the industry? In my view, the top three business benefits are as follows:

1. A greater understanding of your risk and exposure – When do you need to hedge your risk? You need to make sure that your firm isn’t taking more risk than you intended to – however, without knowing the facts and figures, it is as if you are blindly steering a ship. Risk Management tools provide you with accurate, up-to-date information so that you don’t put your firm in danger.

2. Ability to optimise profits - Such risk management technology can provide a greater understanding of where exactly the profits are coming from. Which trades are profitable? How can the brokerage make more money?

3. A simple way to meet regulatory reporting requirementsBusiness Intelligence tools designed for FX brokers can provide a quick and easy way for back offices to access and report required data.

In addition, there’s a question of the accuracy of information. Many brokers typically export information from MT4 or MT5 into their spreadsheets for analysis. This is not only laborious and limited but is also open to human error.


Components of a Typical BI Toolkit?

If I was advising a broker on what to look for when selecting a Business Intelligence technology, my top five list would include:

1. Flexibility – Different brokers want to view data in different ways. The product they select must be flexible in the way that the data is presented, ensuring that brokers can see key information and group the data in a way that is most pertinent to their business. Having the ability to create tailored dashboards with high-level business metrics is absolutely critical as is the ability to drill down by categories of your choice or even by individual trades.

2. Simplicity - The product must be easy to use and easy to access. Ideally, it should be web-based so that you can access it from any device at any time.

3. Responsive – The product must provide access to live data, consolidating information from across multiple servers, and shouldn’t need to constantly be refreshed. It should have built-in alerts and the brokers should also be able to set parameters for alerts to be triggers in specific situations.

4. Created for FX brokers– The product needs to have specialised calculations built-in which are relevant for the industry – e.g. what is the percentage of winning trades vs losing trades, what’s the volume traded at certain times?  It needs to be able to provide in-depth analysis of complex data sets.

5. Simple integration – The product needs to interface with Excel and be easily integrated with in-house CRM tools. This will give more powerful and therefore more impactful data. It should also be able to be easily integrated with a range of trading platforms, not just MetaTrader in order to give increased flexibility to brokers.


Selecting the Right Provider

Having assessed the product attributes which are important, the next step is to ensure that you select a reputable provider for the Business Intelligence software. It's important to choose a firm with a good track record and a strong level of support across all time zones, including initial training sessions to ensure that the solution is set up for your businesses individual needs and that you are gaining full value of the functionality.

Value for money is also important, particularly in current times. Look at the Total Cost of Ownership – there is little point in buying a product that looks the least expensive but requires high support costs and a lot of time from your in-house IT team in order to ensure it is running effectively.

Lastly, this is a purchase that requires a long-term partnership approach. I always think you should only buy from a company which you like dealing with and where you find the team easy to work with. If you find them frustrating to deal with, then you have selected the wrong technology partner!


By Tom Higgins with input from Misha Kipnis.

Want to learn more about Gold-i's Business Intelligence Tool, Visual Edge? Get in touch today

About the author

Tom Higgins

Tom Higgins

Tom Higgins is the Founder and CEO of Gold-i with experience in financial technology spanning over 25 years. With an in-depth knowledge of the trading technology industry, Tom set up Gold-i in 2008 after spotting a gap in the market to enhance the FX trading process for retail brokers. As the inspiration and driving force behind Gold-i, Tom has played a major role in disrupting the retail FX and Crypto market, giving opportunities to brokers/exchanges across the globe. Now extending the firm’s focus to the institutional market, he uses his market insight to continue to drive innovation.